Deeply involved in the field of peptides for more than 20 years, perfect industrial chain layout

The company is a leading domestic polypeptide drug enterprise. Its main business includes pharmaceutical research and customized production services, and independent R&D, production and sales of generic peptides and pharmaceutical products. Against the backdrop of the high popularity of the peptide industry at home and abroad, the company's own integrated advantages in the peptide industry chain are expected to continue to benefit. The company has a large number of API registrations, and the formulation sector is expected to continue to participate in the R&D and production of cutting-edge domestic innovative peptide drug projects through collection and release, pharmaceutical services and customized production, and obtain project increases. At the same time, the company's new production capacity is about to be gradually released, breaking through the bottleneck of business growth.

Large varieties continue to emerge, and the peptide drug industry is booming

With the advent of many new major peptide drugs such as simeglutide and tirpotide, the scope of application of peptide drugs is gradually expanding, and the market space for peptide drugs is expected to expand further. The peptide drug market is expected to grow to 96 billion US dollars in 2025, with a compound growth rate of 8.8% from 2020 to 2025. It is expected that by 2030, the market size will reach 141.9 billion US dollars, and the compound growth rate from 2025 to 2030 will be 8.1%, and the industry will maintain steady growth. Although peptide drugs in China started late, they are growing strongly. The global market share is expected to reach 23% in 2030, a significant increase from 14% in 2020. As a leading integrated enterprise in the field of peptides in China, Shengnuo Biotech has the highest number of registered API products, leading the domestic market share for pharmaceutical products represented by cabectin.

Domestic and international demand continues to benefit, production capacity is being released soon. Equity incentives show confidence that the company's overseas sales of APIs increased significantly, with a year-on-year increase of 97.51% in the first half of 2024.

In the first half of 2024, the company's formulation business achieved revenue of 94.56 million yuan, an increase of 48.27% over the previous year. The amount of injectable somatostatin and injectable atosibane was collected and released after winning the bid in June 2023.

As downstream demand continues to rise, the company accelerates the release of production capacity. The “395 kg per year production line project for polypeptide APIs” is expected to enter trial production by the end of 2024, and the “Innovative Peptide Drug CDMO and API Industrialization Project” is expected to be put into operation in 2025. The production capacity of APIs in this project is expected to increase from the current 404 kg/a to 850 kg/a.

In June 2023, the company released the 2023 “Restricted Stock Incentive Plan”. According to our estimates, using the 2022 and 2023 EBITDA values and operating income announced by the company as a starting point, the company's EBITDA or operating income is expected to reach a high double-digit growth rate of 20% or more in 2024 and 2025, which strongly demonstrates the company's firm confidence in future development.

Profit forecasts and investment suggestions:

We expect the revenue side of the company to be 0.596 billion yuan, 0.799 billion yuan and 999 million yuan respectively, with revenue growth rates of 36.94%, 34.07% and 25.06% respectively. Net profit to mother is expected to be 0.106 billion yuan, 0.15 billion yuan and 182 million yuan respectively in 2024-2026, and net profit to mother of 50.95%, 41.57% and 21.19%, respectively. The current stock price corresponds to PE at 30.63, 21.64, and 17.85 times, respectively. It was covered for the first time and gave a “buy” rating.

Risk warning:

Risk of R&D falling short of expectations, risk of order fluctuation, and risk of increased industry competition.